Vol 13 (2016) - Issue 1

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The Impact of the ‘Macron’ Law on French Insolvency Procedure

Without a vote in Parliament, Mr. Emmanuel Macron, French Minister of Economy, Industry and Digital, passed a law 'for the growth, activity and equal economic opportunity' No. 2015-990 dated 6 August 2015, published in the Official Journal of the French Republic on 7 August 2015. Most of its provisions are applicable for all new proceedings as of 8 August 2015. Only a year after the modification of the insolvency law by the Order of 12 March 2014, the 'Macron' law has had a substantial impact on procedures for the prevention and treatment of business difficulties.
This article gives an overview of the main impacts.

The new possibility to expel shareholders: a smooth revolution
Since 18 December 2008, it has been possible, when the company’s restructuring required it and only upon request of the Public Prosecutor, to replace one or more officers of the company. To this end and under the same conditions, the Court may impose non-transferability of the shares, equity securities or securities convertible into shares held by one or more managers and decide that the attached voting rights will be exercised, for a period it determines, by a Court-appointed representative. Similarly, it may order the sale of these shares, equity securities or securities convertible into shares held by the same people, the sale price being fixed by an expert.
New article L. 631-19-2 of the French Commercial Code introduced wider powers for the removal of shareholders where a judicial reorganisation plan is under consideration. This provision clearly impacts the shareholder’s property right, which is overprotected in France and therefore, it raised severe issues.
This provision was already contained in the preceding reform of insolvency proceedings (Order of 12 March 2014 referred to above). It was hotly debated and was eventually abandoned at the time because the conditions for its implementation did not seem restrictive enough in the eyes of the French administrative Supreme Court (the Conseil d’Etat).
The measure was reintroduced in the Macron bill and the Conseil d’Etat validated it, considering that such a violation of the rights of the shareholder met 'the objective of general interest to preserve the activity of a company with proven economic and social importance.'
A fundamental question of constitutionality was raised on 7 July 2015 by the Commercial Chamber of the Supreme Court, which stated that such article L. 631-19-2 could impinge on propriety rights and equality and therefore sent this question to be examined by the Constitutional Council which examines conformity of the law with the French Constitution. On 5 August 2015, the Constitutional Council validated the possibility of eviction of shareholders of a company in a judiciary restructuring, or by forced transfer or by dilution of their participation, to preserve creditors’ rights.
Considering these issues, the implementation of this reform was drafted by the legislator with extreme care. New article L. 631-19-2 of the French Commercial Code therefore provides for certain strict conditions that must be met before the measure of forcing a shareholder to sell its shares can be imposed by the French Commercial Court:
– The process is only applicable to insolvency proceedings, meaning that the company cannot pay its debts with cash. Therefore, it excludes prevention ('mandat ad hoc', safeguard, conciliation) procedures. For information, Germany authorises such process even in case of safeguard proceedings.

– The measure is limited to companies with more than 150 employees or which control one or more companies having more than 150 employees (article L. 2331-1 of the Labour Code).